THE REASON EHY UK ECONOMY NEED PLAN B

For several months, George Osborne has vigorously defended Plan A that includes 130m in cuts to public expenditure over five years, a scale unprecedented since the 1930s. In doing so, many have given him the benefit of the doubt, but no more. The imminent quarterly figures for growth are likely to signal yet again that the economy is flatlining. Now, a diverse range of organisations and individuals both secular and religious; on the left and on the right; drawn from the City and business; from the trade unions and from the international ranks of economists and academics is increasingly speaking as one. What they demand is the formulation of a Plan B. And fast. The voices are not all in accord on what Plan B might constitute. How to diversify and rebalance the economy; how to promote growth and how to restore ethics, mutualism and a sense of fair play to an economy and society does not easily command a consensus. However, we are witnessing an important shift. There is an awareness that a "business as usual" approach is no longer acceptable. The Observer welcomes this change of direction and the initiation of a debate that could prove historic in the salvaging and reshaping of our economy and the resetting of our national priorities for years to come. A letter is published today in the Observer from 100 renowned academics and economists. They point out that the UK jobless total is at its highest for 17 years. Dr HaJoon Chang and others warn starkly: "If the government persists with Plan A the deficit could rise, not fall." This prediction comes in the wake of several days of abysmal news. The pay of FTSE directors enjoyed a rise of up to 49% last year; by contrast, in the last quarter, the financial wellbeing of the average family fell at the fastest rate for 14 years. Another study has found families were 15 a week worse off in September 2011 than in the same month the year before. In addition, small to medium companies, the engine of a country's growth, have struggled to find financing. In spite of 275bn in quantitative easing (QE) given to the banks since 2009 to encourage them to lend, the proportion of small businesses turned down for bank finance quadrupled between 2007 and 2010; this shameful rejection rate is among the highest in Europe. It is hardly surprising that issues such as accountability and morality are now also part of the economic debate. In "Plan B: A Good Economy for a Good Society", published by Compass, a left-ofcentre pressure group, the extent of Plan A's cuts is described as "an act of economic sadomasochism". The report argues that Plan A is based on a false set of assumptions. The country is neither bankrupt nor has it "maxed out on credit cards". Some of the measures in this Plan B echo the proposals outlined by the 100 economists. They include reversing some cuts to save public sector jobs; the use of QE to invest in a green new deal; increased benefits for those on lower and middle incomes to stimulate demand and the creation of a British investment bank to leverage and back investment in low-carbon sectors such as housing, transport and renewable energy. What neither mention and

which, in our reckoning, deserves consideration is an investment in highly subsidised good-quality childcare to boost employment, support child development, reduce benefits and increase tax revenue. The umbrella group's Plan B rejects one of the five points put forward by Ed Balls, the Labour shadow chancellor, in his version of Plan B, namely a cut in VAT. The report argues that this would benefit the better-off most. Indeed, in this burgeoning debate, some might argue that Ed Balls's solution to the economic crisis is set in the same mould as that which has influenced fiscal policy for the past several decades. What the Compass report calls for is far more radical and challenging. It rightly calls for an end to the short-termism of the high-debt, low-wage, low-investment economy. Instead, if citizens are to "flourish", they require reasonable health, income and a value placed on the development of aspiration and an appreciation of a sense of self-worth, not just net worth. (According to the charity, the Sutton Trust, improving social mobility could bring 140bn a year to the economy.) Some may profoundly disagree with elements of these options to Plan A. However, the vigour of this debate offers not only practical solutions, it also brings with it a muchneeded optimism. It challenges the view that we live in a post-hope era. On the contrary, it reminds us that growth, although struggling, is not entirely absent from the British landscape. David Cameron has set out his own commitment to a more balanced economy with greater growth coming from the non-financial sectors, "the industries of the future", including the creative industries. The latter, embracing fashion, textiles, communications, music and technology, already account for 6% of UK GDP, employ more than 2 million people and bring in more than 17bn a year in exports. In independent television production, there has been a 34% increase in export growth in the past 12 months. The barriers facing the creative industries capture in miniature the challenges facing the economy as a whole in trying to establish growth that is more evenly shared across Britain and between industries. There is a need for better access to finance and greater support for innovation. One study discovered that the common link in the 11,000 highly diverse companies that created 54% of the new jobs (2002-8) was that commitment to innovation. Government and local authorities have also played a part in the growth of creative industries by protecting international property (IP) for instance and investing in clusters of industries (a route that is vital for the north). Manchester, for example, is one of Europe's largest creative and digital and media hubs. Any Plan B must recognise that government has to play an active social and economic role in, for instance, providing infrastructure, tax incentives, in regulating and, when necessary, in deregulating and by investing in research and development. Not all can be left to market forces.

So, while Mr Osborne may still be reluctant to talk about Plan B, or even Plan A Plus, that doesn't mean the rest of us can afford to stay mute. As our columnist Will Hutton has argued in these pages many times, and in his latest book, Them and Us, it is imperative that we consider not just the value of economic growth, but also the values that underpin it. Now is the time for each of us to lend our support to the voices attempting to shape our new model economy. WRITTEN BY: Onyekachi Ekebere